Invest fast or slow?

Question

I’ve run into analysis paralysis and I’m looking for help. My goal is to have passive income enough to leave my 9-5 ASAP. I have a plan where I could be financially independent in 3 months, or financially free 60k/yr in six months, but it would require moving quickly and doing deals that have lower cap rates than my ideal (doing a buy, rehab, rent, hold strategy).

There’s another plan where I could be financially abundant 140k+/yr in 2-4 years. Looking for higher cap rate deals and doing the BRRR method. But loan requirements tell me it would require staying in the 9-5 to get there. Looking for low interest 30 yr fixed mortgages. I’m just unhappy in the 9-5. But the comfort and longevity (as well as being able to give back more) of financial abundance is very appealing.

I really enjoy the real estate game and all the moving pieces. I’m handy and can do all (most) of the renovation work. If I had 100k in passive income now, I would follow my favorite hobby (outside real estate) full time. I’m highly employable, I just don’t want the job, I want my time.

What would you do?

Don Konipol · Answer

@Chad Kirchner

In real estate, things always turn out to deviate from “the plan”.  Real property investors, especially those doing it full time, learn to live with a series of ups and downs.  I had an acquaintance who purchased 11 mortgage notes between 2004 and 2007, reached a certain milestone in passive cash flow, closed his business, and intended to live off the interest while starting a real estate syndication operation.  In 2008 ALL his notes defaulted, he had no income, and his syndication business received no traction.  There’s and old Yiddish saying “Man plans, God laughs”.

While it’s important to have capital, living expenses, and access to credit when entering real estate full time, the main determinant of success will be you.  You need the knowledge, experience, drive and decision making ability.  Without these personal attributes success will be problematic.

Most people dream about leaving their jobs and entering a full time entrepreneurial career, but it remains just that, a dream.  For the minority that successfully make the transition, they are able to focus on the job ahead rather than worry about failure.  In truth, the only reason people who are unsatisfied with working in a business they don’t own remain in that position is fear of failure.  All other “reasons” are just rationalizations.  If you quit your job and enter real estate as a full time business it’s because you should, if you remain in the job world and don’t enter real estate full time it’s also because you shouldn’t, so that the prophesy is self fulfilling.

Craig Jeppesen · Answer

Slow and steady always win the re race. Move too fast and take on too much risk and you can get burned. Not saying you will but saying you can. good luck with your decision.

Luke Miller · Answer

@Chad Kirchner I was in your position a while ago. I wanted desperately to leave my job. The only regret I have after leaving was that I didn't hustle harder on the side while I still had stable income. It's a romantic idea to leave your job, but it's also scary. You are the decider of your day. It's really easy to under work and over work. Feel free to reach out with more questions.

Constancia R. · Answer

@Don Konipol, do you know what happened to cause your acquaintance to default on all of those notes? I could see one or two, but ALL of them? Were they all in the same city? Same area? What in the world happened?

Trevor Ewen · Answer

@Chad Kirchner

Years ago, I was acquainted with an investor who was moving very 'fast'. I always felt intimidated, because he had bought significantly more single family homes than I had in a relatively short period of time. I felt like the hobbyist and he was super-charging.

Fast-forward, it's not an asset class I am all too focused on (I still own several, bot not a focus). Like most people here, I have had more recent success scaling up to large multis.

The gain I had from going 'slow' was that I could use smaller experiences to sit back and reflect. I had more opportunity try several options, plot my next move, and never bet the farm on a single idea at a single time.

Definitely in the slow camp, but it's worth noting I am a passive investor. I am very content to keep the 9-5.

Account Closed · Answer

@Chad Kirchner

Chad I can give you my opinion as someone who can relate to you. I started in REI about a year ago after I lost my job. I jumped headfirst into my first BRRRR while being unemployed. I did find another W2 position that I'm at now, but quite honestly, I have no idea what might happen to it. So, to prepare for the worst, in about 12 months I've aquired 18 properties (about to close on 2 more). Yes, some have cashflow less than others. Yes, some don't have as good of lending terms as others, but all-in-all they generate enough income to cover expenses in case of an emergency. Maybe I'm growing too fast, but honestly, I work in a dying W2 industry so my options are very limited if I lose my job again. REI has to work for me. After I reach about 25 doors, I'm going to re-evaluate my model however.

Anyway, best of luck and if there's anything else I can answer for you, I'm happy to do so.

John Fortes · Answer

My outlook is always the long game! You'll reap the benefits efficiently if you play the long game. Has anything ever ended with a good result when rushing?

Trevor Ewen · Answer

@Chad Kirchner

My projects these days are almost always syndications in the 150-250 unit range. Usually value-add projects. Have not done any new development, although I am not opposed.

The feast or famine aspect of smaller SFH and multis is part of what you're expressing in the concern about good opportunities and their scarcity. It's tough for me to time that and keep up with a system. I am better off with a national reach and partners that are syndicating different kind of projects throughout the country. Granted, I am in a 'pure passive' mode, which is primarily a function of my career and the market I live in.

Chad Kirchner · Answer

@Trevor Ewen Thanks for that response, Trevor.

I also focus on MF, 3-4 units. It sounds like you may be doing larger MF investing but as part of a development. Is that correct?

I just purchased a house hack 3 family (distressed property in an A neighborhood) for 5% down, and put an agreement on a 4 family w/25% down in a class A/B neighborhood that is just below market rate. Had I seen the 4plex first, I would have done that at 5%. I’m not interested in single family unless they are solid vacation rentals.

It’s my style to pause and reflect after each deal, then rerun the numbers once it’s running smoothly and make better data driven decisions moving forward. I’m enjoying the learning.

Part of my concern is putting 25% down on the next property (4plex) and eating up my capital, instead of waiting for the BRRR method to be complete with the distressed house hack property. My area does not have many MF houses, so when one comes up at a reasonable price and in a great neighborhood I have a hard time letting it go and wait for the next one.

Chad Kirchner · Answer

@Don Konipol Thanks for the reply.

I am okay with the ups and downs, and fully expect there will be some. I'm looking for properties that cash flow positive (like we all are). I'm also in it for the long haul. I am not worried about living expenses, or not being able to get another job. I'd like to devote more time to all that Real Estate entails, and a balanced lifestyle.

It's more of a question of strategy for me. I've been studying RE for the last 3 years (I know I can't learn it all in a lifetime) and I am now in a position to make a move. I could drain my savings to living expenses for 1 year, and have ~60k coming in from rentals. Or go bigger over a 4 year time-frame (maybe we'll see a dip in the market then). Of course, it's entirely my choice and I have clear criteria which helps.

I'm wondering, as a seasoned investor, What would you recommend to set yourself up for both passive income (for retirement) and potential appreciation down the line?  Do 1 great deal a year for 4 years, or 4 good deals in 1-2 years?

Invest fast or slow?

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